Ryder’s R top line is bolstered by its recent acquisitions of Cardinal and IFS, boosting the company’s performance. The shareholder-friendly approach is encouraging. However, R is grappling with weak liquidity and escalated operating expenses.

Factors Favoring R

Ryder's long-standing commitment to sustainability through initiatives like fleet upgrades, reducing truck idling, and improving route efficiency is commendable. A SmartWay partner since 2006, Ryder has earned the Excellence Award six times, demonstrating leadership in reducing emissions and promoting greener operations. The EPA SmartWay program acknowledges Ryder's efforts to help reduce pollution and support climate change mitigation in the freight industry.

Despite the market challenges, the company's acquisitions of Cardinal and IFS contributed to a 9% increase in operating revenues, reaching $2.6 billion in the third quarter of 2024 compared to the prior year. This growth highlights the positive impact of these strategic acquisitions on Ryder's overall performance.

Ryder’s focus on returning capital to shareholders through dividends and buybacks aligns with its strategy of maintaining a balanced and sustainable growth model. In the fourth quarter of 2024, the company launched a new share repurchase program, authorizing the buyback of up to 2.0 million shares from Oct. 9, 2024, to Oct. 9, 2026. This program aims to enhance capital flexibility, manage leverage and boost shareholder returns. It follows the completion of a similar 2.0 million share repurchase program in September 2024.

Moreover, in the third quarter of 2024, on a year-to-date basis, Ryder returned $382 million in cash to its shareholders through share repurchases and dividends.

Owing to such tailwinds, shares of R have risen 40.8% over the past six months compared with the industry’s growth of 24.6%.

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R: Key Risks to Watch

Ryder’s financial stability is challenged by the increased operating expenses and weak liquidity. In the third quarter of 2024, the total operating expenses rose 9% year over year. This surge in operating expenses was primarily driven by elevated cost of services and selling, general and administrative expenses, adversely impacting the company’s bottom line.

In the third quarter of 2024, the cost of services accounting for 59.5% of the total operating expenses rose 16% year over year and selling, general and administrative expenses surged 6.1% year over year.

Ryder exited the September-end quarter with a current ratio (a measure of liquidity) of 0.74. A current ratio of greater than 1 is always desirable as it indicates that the company holds sufficient cash to meet its short-term obligations.

Ryder’s Zacks Rank

R currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the Zacks Transportation sector may consider Westinghouse Air Brake Technologies WAB and SkyWest SKYW.

Westinghouse Air Brake Technologies currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

WAB has an expected earnings growth rate of 2.01% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average beat of 9.46%. Shares of WAB have risen 75.3% in the past year.

SkyWest currently sports a Zacks Rank #1. SKYW has an expected earnings growth rate of 4.07% for the current year.

The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 79.12%. Shares of SKYW have climbed 149.7% in the past year.

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